Working Paper No. 1279

The Rise and Decline of Industrial Foundations as Controlling Owners of Swedish Listed Firms: The Role of Tax Incentives

Published: May 20, 2019, revised September 2019Pages: 31Keywords: Corporate governance; Entrepreneurship; Family firms; Foundations; Owner-level taxationJEL-codes: H20; K34; L26; N44

The Rise and Decline of Industrial Foundations as Controlling Owners of Swedish Listed Firms: The Role of Tax Incentives Magnus Henrekson, Dan Johansson and Mikael Stenkula


Private foundations became a vehicle for the corporate control of large listed firms in Sweden during the post-war era, but in the 1990s, they were replaced by wealthy individuals who either directly own controlling blocks or who own them through holding companies. We study potential explanations for this change and pro­pose two taxation-related candidates: shifts in the relative effective taxation across owner types and the dismantling of the inheritance taxation that prevented the genera­tional transfer of the ownership of large controlling blocks.

Our analysis exploits newly computed marginal effective capital income tax rates across capital owners, accounting for all relevant factors, including rules governing tax exemptions. We show that the 1990–91 tax reform, abolition of the wealth tax for controlling owners in 1997, 2003 tax exemption of dividends and capital gains on listed stock for holding companies with a voting or equity share of at least 10 percent, and abolition of the inheritance and gift taxes in 2004 reversed the rules of the game.

Recently, control has largely been wielded through direct ownership, and the role of foundations is rapidly declining. These find­ings point to the importance of tax incentives for the use of foundations as the control vehicles of listed firms.

Magnus Henrekson

Contact

Ph: +46 (0)8 665 4502
magnus.henrekson@ifn.se

Mikael Stenkula

Contact

Ph: +46 8 665 4530
Mob: +46 700 44 87 27
mikael.stenkula@ifn.se

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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